I would like to know that
We have taken a loan to construct a building for business. It gets completed in 11 months. Since it is not a qualifying asset, where do we show the interest on loan for the 11 months period?
Thanks
1 Replies
Yatrik Jobanputra
(CA Final Student)
(170 Points)
Replied 09 March 2013
Hello Mr. Neeraj,
As per the Explanation provided in AS - 16,
"What constitutes a substantial period of time primarily depends on
the facts and circumstances of each case. However, ordinarily, a
period of twelve months is considered as substantial period of time
unless a shorter or longer period can be justified on the basis of
facts and circumstances of the case. In estimating the period, time
which an asset takes, technologically and commercially, to get it
ready for its intended use or sale is considered."
Hence, you should capitalise the expense of Interest on Loan account.
Regards,
Yatrik Jobanputra
+91 90333 08699
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